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Business report on environmental sustainability practices in Schmolz+Bickenbach Group against theory and best practice

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Abstract: This business report views the activities with Schmolz+Bickenbach holdings with the primary focus on its Swiss subsidiary: Swiss Steel. The company outperforms the global competition in environmental aspects and product quality, however, faces losing the market to cheaper prices. The proposed solution is to raise the awareness of the end-consumer regarding the material being used in producing and delivering the end-product by the buyers of SB with the label SB-Inside.

Introduction

Background

While the notion environmental sustainability only entered public discourse first after Brundtland Report by UN in 1987, ever since it has become a high priority concern to businesses, governments and consumers (Mulligan, 2014, 11-27).

In 2017’s board meeting of Schmolz+Bickenbach in attempt to create shared corporate culture across all their subsidiaries the management added Corporate Social Responsibility to the agenda (Eichler, 2017).

This report provides a brief analysis of environmental sustainability issues with the main focus of the Switzerland based production subsidiary of Schmolz+Bickenbach, with the objective of suggesting creative solutions for the future direction.

Company

Founded in 1919 Dörrenberg as steel trading company, renamed to Schmolz+Bickenbach in 1937 (Schmolz+Bickenbach n. d.). Today, a publicly traded holding based in Luzern, it is a holding company of high quality steel producers with four major subsidiary firms in Germany, Switzerland, France, the US (Schmolz+Bickenbach n. d.).

Products & Services

The parent company, based in Luzern, shares the distribution and customer relationship management practices and solutions across subsidiaries, with a focus on building relationships and offering consulting services for the whole life cycle of product (Schmolz+Bickenbach, 2017) as one of their main competitive advantage.

State of art steel production from scrap is the core competency of the company. The series of accusations in 2010s have allowed the company to move upstream and produce all range of long steel products, consisting of quality & engineering steel 70% revenue, stainless steel 20% revenue, and tool steel accounting for 10% of revenue generated in 2017.

Switzerland main subsidiary

Swiss Steel AG is the steel production subsidiary in Switzerland. The main customers of the company are European automakers, specifically in Germany and France and their subsidiaries in neighboring countries (Schmolz+Bickenbach, 2017) (Swiss Steel, n. d.).

Approach & Methodology

This report is produced with secondary data, without any access to the company or any related company within its supply chain. In addition due to limitation of time and resources in devising this report, managerial level details are omitted.

Specially as Schmolz+Bickenbacha is a holding company of steel producers in direct competition with outside European producers (Schmolz+Bickenbach, 2017), the main objective of this report is provide guidance on the future of subsidiaries and other firms which could be purchased through the lens of optimizing share-holder value while improving environmental sustainability benchmarks of the operations.

Analysis

Swiss Steel AG as with any other subsidiary of Schmolz+Bickenbacha produces uses 100% scrap (Schmolz+Bickenbach, n. d.). Hence, there is little benefit of analyzing the corporation respecting the concepts of “circular economy” and “recycling”, as these are at the core of the holding’s philosophy.

However, there are four other aspects of thematic of environmental sustainability in which the group and specifically the Swiss Steel subsidiary are taking action in, however the possibility for improvements aren’t as exhausted as the aforementioned aspects.

Changing patterns of consumption

Businesses rely on consumer to exists, and ever since the dominance of discussions on environmental sustainability the difference between the rich and poor nations and heavy burden of rich countries consumption has been widely acknowledged (Speth, and Zinn, 2008). And consumers in the northern hemisphere are increasing more aware of their environmental footprint, for example: A study of North American consumer in 2011 found consumer are more sensible to environmental sustainability than economic and that out performs influences of lower prices (Choi, and Ng).

Stages of Corporate Environmental Responsibility

According to Visser (2014) there are

  • Defensive CSR: where greed rules every decision and it is only the government regulation, shareholders intervention or employees can change the course of the company

  • Charitable CSR: companies and individuals who have made a fortune from a business and within a community feel the urge to ‘giving back to society’

  • Promotional CSR: where the corporate’s efforts are directed at changing the public’s perspective

  • Strategic CSR: where the criteria behind the efforts is whether the impacts caused on the society would in return benefit the coopration and it’s practices or not, as for example Coca Cola investing in Indian water after its products were banned due to pestiside contamination (Visser, 2014)

  • Transformative CSR: where a business began with the ambition of transforming a market failure while making profit, for example Elon Musk and Tesla which aimed at reviving the long abandoned EV project at General Motors.

While this perspective is not entirely equivalent to the “5 Stages of Corporate Environmental Responsibility”, and perhaps that framework provides a better mean to compare different businesses and sectors in classifying their attempts, the focus of this framework is to mark where the motives of the directors are and how that influences the corporate decisions regarding CSR. Which in the context of providing suggestions for Schmolz+Bickenbach is more relevant.

Standards of Environmental Conduct

Standards of conduct both provide a guideline and a trademark of achievement regarding a corporates environmental responsibilities.

The more relevant one to the Steel production are ISO 14000

Regarding the use of energy the Federal Swiss government’s plan for 2050 is the second high impact environmental regulation, unlike the former not entirely voluntarily rather developed with negotiation with the business sector.

Findings

  • Schmolz+Bickenbach’s production branches are active in the most industrially advanced societies and with highest level of regulation, hence the so far the law has encouraged the company and it’s subsidiaries to maintain their high standard compared to other producers outside of Europe, or even in Western Europe.

  • Swiss Steel AG adheres with ISO 14000 and a few other cerfiticate regarding their use of energy (Swiss Steel, n. d.).

Conclusions

  • The companies high standards of production are a big assets while at the same time could become a liability.

  • Competitors outside of Europe do not need to meet the same legal requirements and can produces cheaper steel products, whoever they are not always with the same quality (Schmolz+Bickenbach, 2017).

Recommendations & Benefits

While European Government and Switzerland as well, would be held back by the strategic importance of high quality steel production for reasons of national security at the same time, other than defense sector other businesses may be encouraged to use the alternatives from outside markets. That is where the next stage of strategic focus of the group should be:

Moving form Defensive CSR and Charitable CSR or as in the 2017 report it manifests itself in the interview with CEO Promotional CSR and adopt a proactive approach regarding their products.

However any proactive approach would result in becoming uncompetitive relative to producer outside of EU or alternatively depending on the government subsidy. But borrowing from the the concept introduced in analysis section: it is in aligning changing patterns of consumption with Transformative CSR that a fruitful result and conducive to further financial performance can be found;

“SB-Inside”

The author’s proposal is to introduce a new brand similar to “Intel-Inside” campaign by Intel for its trade-mark chips. This plan consists of two chapters:

  • A fully green steel production solution:

    • Taking into account all neglected aspects of consumption of energy, specifically in distributions.
    • Adopting Zero Carbon Emission policy by initiative likes planting trees
  • Further accusations:

    • Buying companies in related iron production that are used in the buyer’s products: for example Aluminum for cars, so the label “SB-Inside” stands for both the body of the car and other iron parts inside it.

Bibliography

  • Mulligan, M 2014, An Introduction to Sustainability : Environmental, Social and Personal Perspectives, Taylor & Francis Group, London. Available from: ProQuest Ebook Central. [28 November 2018].

  • Choi, S. and Ng, A. (2011) ‘Environmental and Economic Dimensions of Sustainability and Price Effects on Consumer Responses’, Journal of Business Ethics, 104(2), pp. 269–282. doi: 10.1007/s10551-011-0908-8.

  • https://www.schmolz-bickenbach.com/fileadmin/user_upload/SB_COM/Historie/sb_de.pdf

  • W. Visser, CSR 2.0, SpringerBriefs in Organisational Studies, DOI: 10.1007/978-3-642-40874-8_2, Ó The Author(s) 2014

  • Speth, J.G. and Zinn, D., 2008. The bridge at the end of the world: Capitalism, the environment, and crossing from crisis to sustainability (pp. 1-2). New Haven, CT: Yale University Press.